[ G.R. No. 222537.

February 28, 2023 ]

COSAC, INC., PETITIONER, VS. FILIPINO SOCIETY OF COMPOSERS, AUTHORS AND

PUBLISHERS, INC., RESPONDENT.

DECISION

HERNANDO, J.:

This Petition for Review on Certiorari1 assails the May 28, 2015 Decision2 and the
January 14, 2016 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 101415
that affirmed the October 24, 2012 Decision4 and the July 22, 2013 Order5 of the
Regional Trial Court (RTC) of Quezon City, ordering COSAC, Inc. (COSAC) to pay Filipino
Society of Composers, Authors and Publishers, Inc. (FILSCAP), damages for unpaid
license fees/royalties.

The Facts

FILSCAP is a non-stock, non-profit corporation comprised of composers, authors,

and music publishers. It is tasked to enforce and protect the performing rights of
copyright owners of musical works. FILSCAP is also authorized to issue licenses and
collect license fees for the public performance of copyrighted musical works under its
repertoire,6 whether for profit or not. FILSCAP alleged that Filipino composers
executed deeds of assignment, and foreign composers/publishers of musical works
executed reciprocal representation agreements, whereby they assigned to FILSCAP
their rights to the use and protection of their copyrighted works.7

On February 3, 2005 and January 13, 2006, a representative from FILSCAP who
monitored8 Off the Grill Bar and Restaurant (Off the Grill) in Quezon City (owned and
operated by COSAC) discovered that the restaurant played copyrighted music without
obtaining from FILSCAP a license or paying the corresponding fees. Thus, FILSCAP
advised COSAC to secure the required licenses and sent letters of the same tenor
dated September 20, 20049 and October 14, 2004.10 Without getting a favorable
response from COSAC, FILSCAP sent a Final Demand Letter11 dated November 10,
2005 to the former. However, COSAC still refused to comply.

Thus, on February 13, 2006, FILSCAP filed a Complaint12 for infringement of

copyright and damages against COSAC. FILSCAP alleged that COSAC's refusal to secure
the license and its continued use of copyrighted music without the requisite
performing rights constitute acts of infringement. Thus, COSAC should be compelled
to secure a license and to pay royalty fees, damages, and attorney's fees.13

Conversely, COSAC argued that FILSCAP is not a real party-in-interest since it did
not prove that the copyright owners assigned their rights to FILSCAP. COSAC denied
committing infringement as it had no knowledge about what the band members
would sing as pai1 of their performance, and because songs once aired and
performed become public property. In its counterclaim, COSAC prayed for attorney's
fees and litigation expenses.14
 To prove its standing to file the case, FILSCAP presented the deeds of
assignment15 executed by the local copyright owners in its favor, together with their
reciprocal representation agreements16 with foreign societies abroad. Likewise,
FILSCAP submitted a Certificate of Authentication17 as well as an International
Confederation of Societies of Authors and Composers (ICSAC) Certification18 dated
September 13, 2006 as proofs of its membership in the ICSAC, and to show that it is
the only ICSAC-recognized collective management organization in the Philippines
authorized to license the public performance of musical works.19

FILSCAP also provided a list from Fiche Internationale,20 a database containing

information pertinent to the interested parties of musical works. It contains "(a) the
names of the interested parties (i.e., the composer, lyricist [author], publisher and
sub-publisher of the musical work), (b) the society to which each interested party
belongs to, and (c) the percentage of sharing of performance royalties between the
interested parties."21 FILSCAP averred that Off the Grill played some songs that were
assigned to it and included in the Fiche Internationale's database.22

In the Affidavit23 of Debra Ann Gaite (Gaite), then the General Manager of FILSCAP,
she asserted that the deeds of assignment executed by the composers and publishers
over the performing rights of their works to FILSCAP were duly registered with the
National Library of the Philippines and are easily available to the public.24

During her cross-examination, Gaite stated that the copyright owners authorized
FILSCAP to issue "licenses" to the establishments which sought to play copyrighted
music in their respective venues.25 She explained that the computation of royalty fees
are based on the seating capacity of the establishment.26 Since Off the Grill is
considered as a bar, Gaite stated that the royalty fees should be computed as
follows:27

For lounges/ Bars/ Pubs (Where Dancing is not allowed)

Maximum Live & Mechanical Mechanical Only

Accommodation Capacity Royalty Rate / Day Royalty Rate / Day
100 persons or less [₱] 100.00 [₱] 45.00
More than 100 persons,
[₱] 120.00 [₱] 65.00
but less than 300 persons
300 persons or more, but
[₱] 145.00 [₱] 90.00
less than 500 persons
500 persons or more [₱] 170.00 [₱] 105.0028

Similarly, Ferdinand Gorospe (Gorospe), then the Licensing Manager of FILSCAP,

explained in his Judicial Affidavit29 that the "license" that FILSCAP issues to the users
of the music is basically a written authorization, given that FILSCAP controls the
performance rights over the copyrighted musical works of its members and affiliate
performing rights of societies abroad.30
 Gorospe stated that there is public performance when "a musical work is played to
the public through any means or process,"31 such as when the copyrighted musical
work is "played or performed live through a performer or mechanically through any
audio or audiovisual player or device such as a CD player, VCD player, DVD player,
cassette player, television set or radio player."32 Gorospe elucidated FILSCAP's
position during his testimony, as follows:

Q: To whom do you issue this practice of issuing licenses?

A: We issue it to the users of music.

Q: You mean to the public?

A: Well, to the users.

Q: To the public?

A: To those who want to use the music, but not to everybody.

Q: Who want to use?

A: Who [wants] to use the music.

Q: When you said "who [wants] to use," you are referring to singers?

A: Well, if they are to use it, yes it could be to singers. If they want to
produce a record, then, a license also is issued to them by the parties,
but not FILSCAP.

Q: For example, Mr. Witness, myself, I want to sing a song assigned by the
composer to FILSCAP. If I want to use it, I have to get a license from
you?

A: Technically, singing, no. We need not issue license because singing is

not really – It depends on where you'll sing it, like, for example, if you
want to sing it privately in your bathroom, then why would we issue a
license because that is –

Q: How about a band? They want to sing it in a restaurant. To whom [shall

they] secure a license?

A: Technically it is the establishment. We'll go after the establishment, the

owner of the establishment.

Q: Why the establishment? Why not the singer, Mr. Witness? Or why not
the band?
 A: Because if the establishment allows the singing of the songs, then, the
corporation or the establishment allows public performance.

Q: Why? Is there a control on the establishment over the band to sing

what they should sing?

A: No, not on the particular song but on the act of singing. The bar can
say, You are not allowed to sing because you are not licensed by the
establishment, something like that.

Q: All kinds of songs, Mr. Witness?

A: No, only – well, yes, for copyrighted songs.

Q: Do you have singers or bands who secure licenses from you?

A: As of –

xxxx

Q: Were there other establishments that secure your license?

A: Yes.

xxxx

A: Well, we have Shoemart, we have GMA 7, Channel 2, Channel 5. We

also have bars like, well, we have, before it was the Embassy. We also
have Jollibee, we have McDonald's, Starbucks, et cetera, et cetera.33

Gorospe averred that without an authorization or "license," the public

performance of the copyrighted work is illegal.34 During his cross-examination,
Gorospe asserted that if an establishment allows the singing or playing of copyrighted
songs in its venue, then it also allows the "public performance" of the songs.35

Emigio C. Lejano III (Lejano), then a Licensing Assistant of FILSCAP, stated in his
Judicial Affidavit36 that when he monitored Off the Grill on February 3, 200537 and
January 13, 2006,38 he found that copyrighted musical works under FILSCAP's
repertoire were being performed for the entertainment of the customers.39 In
particular, the following songs were performed live by a band in Off the Grill on
February 3, 2005, for the entertainment of its customers:

1. Ignition

2. If I Ain't Got You

3. Falling In Love With You

 4. Tattooed On My Mind

5. If I Was The One40

Thereafter, these songs were mechanically played as background music for its
customers:

1. Don't Miss You At All

2. All I Wanna Do

3. Strong Enough

4. Don't Know Why

5. Run Baby Run

6. Saturday Night

7. Anything But Down

8. My All

9. Turn The Beat Around

10. Conga

11. Get On Your Feet

12. You're Still The One41

In like manner, on January 13, 2006, the following musical works were performed
by a live band:

1. Officially Missing You

2. Angel

3. At Your Best (You Are Love)

4. Knocks Me Off My Feet

5. Emotion42

Afterwards, the following songs were mechanically played as background music:

1. Everybody's Changing
 2. She Will Be Loved

3. Let's Get Retarded43

Michelle Flor (Flor), a Copyright Examiner from the National Library, mentioned in
her Judicial Affidavit44 that FILSCAP regularly files and deposits with the National
Library's Copyright Office the deeds of assignment of performing rights over
copyrighted musical works as well as reciprocal representation agreements with other
societies abroad.45 She clarified that their office's certification applies to the entire
document even if they only stamp the first page of a multi-page document, in order
to certify that the said file is a faithful reproduction or photocopy of the original one
deposited with the Copyright Office.46 On cross-examination, Flor confirmed that her
office records the application for copyright of an individual or company47 as well as
the transfer and assignment of rights to the copyright to a society like FILSCAP.48

On the other hand, in the Judicial Affidavit49 of COSAC's lone witness, Melrose
Tanan (Tanan), she asserted that bands perform at Off the Grill to provide
entertainment. She also claimed that once music is played, it becomes public
property.50 During her cross-examination, Tanan admitted that music is regularly
played in the restaurant either live or through recorded music via a monitor or music
video.51

The Ruling of the Regional Trial

Court

In a Decision52 dated October 24, 2012, the RTC found COSAC guilty of
infringement.53 The RTC found that:

[T]he unrebutted evidence on record shows that the foreign composers

of the 25 musical works performed live or mechanically played in
[COSAC's Off the Grill Bar and Restaurant], through their foreign societies,
had authorized [FILSCAP] also as assignee of their musical works to file
this case for infringement of copyright and damages against [COSAC]
which allowed such live performance or mechanical playing of the
musical works in its x x x establishment for the benefit of its customers
without the requisite performance license from FILSCAP or without the
payment of the license fees/royalties to FILSCAP.54

Moreover, the RTC held that under Section 182 of the Intellectual Property Code
(IPC), the filing of the deeds of assignment and the reciprocal representation
agreements with the National Library and its non-publication in the Intellectual
Property Office (IPO) Gazette did not render the said deeds and agreements void. The
trial court declared that if this were the intent of Congress, then it should have
expressly provided in the IPC that such assignments and/or agreements which were
not published in the IPO Gazette shall be void.55
 Additionally, it ruled that FILSCAP, as duly authorized by the copyright owners, is a
real party-in-interest and has the standing to file the complaint based on Section
18356 of the IPC.57 Thus, the dispositive portion of the RTC Decision reads:

WHEREFORE, judgment is rendered ordering the defendant (COSAC]

to pay to the plaintiff [FILSCAP] the following sums of money, to wit: a)
Php317,050.00 as damages for unpaid license fees/royalties and
Php5,778.17 as damages for monitoring expenses, both with interest at
the rate of six percent (6%) per annum reckoned from the date of the
filing of the complaint, February 13, 2006, until the same is fully paid; and
b) Php52,003.47 as reasonable attorney's fees and litigation expenses
plus costs of suit. All other claims, including the counterclaims, are
dismissed for lack of legal and/or factual basis.

SO ORDERED.58

Aggrieved, COSAC filed a motion for reconsideration.59 Likewise, it filed a motion

for inhibition60 resulting in the inhibition of the presiding judge61 and the re-
assignment of the case. Nevertheless, the RTC, in an Order62 dated July 22, 2013,
denied COSAC's motion for reconsideration of the RTC's October 24, 2012 Decision.
COSAC appealed63 to the CA insisting that the documents which FILSCAP relied on to
assert its authority were not published in the IPO Gazette as allegedly required by
Section 182 of the IPC.64

The Ruling of the Court of Appeals:

In its assailed May 28, 2015 Decision,65 the CA sustained the ruling of the RTC but
deleted the award for monitoring expenses.66 It held that:

Under Section 177 of the Intellectual Property Code of the Philippines,

a copyright owner has the exclusive right to carry out, authorize or
prevent the public performance of a work and other communication to
the public of the work. To enforce this right, the copyright may be
assigned in whole or in part and the assignee is entitled to all the rights
and remedies which the assignor has with respect to the copyright.
Particularly, copyright owners or their heirs may designate a society of
artists, writers or composers to enforce their economic rights and moral
rights on their behalf.67

The CA found that the copyright owners assigned their rights and remedies to
FILSCAP through deeds of assignment and reciprocal representation agreements. As
such, FILSCAP is authorized to regulate the public performance, mechanical
reproduction, and synchronization rights granted by law to the creators and owners
of original musical works.68 Significantly, the CA held that registration or publication in
the IPO Gazette of the deeds of assignment and reciprocal representation
agreements is not required.
 Citing Section 182 of the IPC which states that "an assignment or exclusive license
may be filed in duplicate with the National Library upon payment of the prescribed
fee for registration in books and records," the CA concluded that the filing is
discretionary and that non-publication in the IPO Gazette did not render said deeds
and agreements void.69 Moreover, the CA ruled that FILSCAP is a real party-in-interest
as it is authorized to enforce the intellectual property rights of copyright owners
pursuant to the deeds and agreements.70

Finally, the CA held that due to the continued infringing activities of COSAC, the
RTC correctly awarded damages in favor of FILSCAP, as well as attorney's fees, as
FILSCAP was compelled to litigate to protect its rights. However, the CA deleted the
award for monitoring expenses since FILSCAP failed to substantiate this claim.
COSAC's counterclaim for attorney's fees and litigation expenses was denied for lack
of merit.71

The fallo of the CA Decision reads:

FOR THESE REASONS, the October 24, 2012 Decision of the Regional
Trial Court of Quezon City, Branch 90 is MODIFIED in that the award for
monitoring expenses is deleted.

SO ORDERED.72

COSAC moved for reconsideration73 which the CA denied in its January 14, 2016
Resolution.74

Unrelenting, COSAC elevated this case before Us based on the following grounds:

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT

HOLDING THE NECESSITY OF PUBLICATION IN THE IPO GAZETTE OF
THE ALLEGED DEED OF ASSIGNMENT/AUTHORITY OF THE
RESPONDENT.

II

THE COURT OF APPEALS ERRED IN ORDERING THE PETITIONER TO PAY

LICENSE FEES/ROYALTIES TO RESPONDENT IN THE AMOUNT OF
[₱]317,050.00 AND MONITORING EXPENSE OF [₱]5,778.17.

III

THE COURT OF APPEALS ERRED IN ORDERING THE PETITIONER TO PAY

ATTORNEY'S FEES IN THE AMOUNT OF [₱]52,003.47.

IV
 THE COURT OF APPEALS ERRED IN NOT GRANTING THE
COUNTERCLAIMS OF THE PETITIONER.75

Thus, the issues in this petition are whether COSAC committed copyright
infringement and if so, whether it should be held liable to pay fees and damages for
the said violation.

Arguments of COSAC

COSAC insists that the publication of the deeds of assignment or FILSCAP's

authority in the IPO Gazette is necessary under Section 182 of the IPC as it serves to
inform the general public of its authority to collect royalty fees.76 COSAC contends
that FILSCAP's authority as assignee is vague and not supported by
evidence.77 Additionally, FILSCAP is not entitled to collect royalty fees because its
authority is defective.

Likewise, the damages and attorney's fees awarded in favor of FILSCAP are
baseless and excessive, especially since COSAC has no control over what the bands
will sing in the establishment.78 Lastly, COSAC maintains that it is entitled to its
counterclaim as it was unnecessarily dragged into litigation, considering that once the
music is played in the airwaves, it becomes public property.79

Arguments of FILSCAP

FILSCAP counters that COSAC's arguments are mere rehashes of arguments raised
in previous pleadings and involve questions of fact which are not allowed in a Rule 45
petition. Contrary to COSAC's contention, FILSCAP offered in evidence the deeds of
assignment and the reciprocal representation agreements. It adds that although
COSAC is a corporation, the petition's verification and certification of non-forum
shopping were not verified by the corporation itself or any of its authorized
representatives but by a certain Jeremy Sy (Sy), the General Manager, supposedly in
his personal capacity. Thus, the petition should be dismissed outright.80

Moreover, FILSCAP avers that the CA correctly held that FILSCAP has the right to
enforce the intellectual property rights over copyrighted musical works pursuant to
the deeds of assignment of the members and the reciprocal representation
agreements with foreign affiliate societies. These were duly filed and recorded in the
National Library pursuant to Section 182 of the IPC. Thus, as copyright owner or at
least the copyright holder of copyrighted musical works, FILSCAP is a real party-in-
interest.81

With regard to the issue of publication in the IPO Gazette based on Section 182 of
the IPC, FILSCAP opines that:

it [is] clear that the word 'may' pertains to the filing of an assignment or
exclusive license with the National Library. From the wording of the law,
this portion of the provision is clearly permissive. On the other hand, the
word 'shall' pertains to the publication in the IPO Gazette of exclusive
 licenses or deeds of assignment which have optionally been filed with the
National Library. [COSAC's] interpretation would render the IP Code
provision absurd as it would appear that it wants this Honorable Court to
disregard the portion of the provision with the permissive term 'may' in
favor of the portion which has the mandatory term 'shall,' when clearly
each word pertains to a separate and distinct object.82

FILSCAP adds that Section 172.1 of the IPC provides that literary and artistic works
are original intellectual creations which are protected from the moment of their
creation. Similarly, Section 172.2 of the IPC states that works are protected by the
sole fact of their creation, irrespective of their form of expression, as well as their
content, quality, and purpose. Hence, musical works are protected by copyright
without need of any other act including registration with any government agency or
publication.83

Moreover, FILSCAP maintains that it should be paid royalties and attorney's fees
and that COSAC is not entitled to its counterclaim.84 It asserts that it can sue for
infringement and recover damages if "(l) the musical works are publicly performed, (2)
the musical works [are] within the repertoire of FILSCAP, and (3) the musical works
were publicly performed without the consent of or license from FILSCAP."85 FILSCAP
asserts that for there to be a public performance, there must be performance of the
work, either directly or by means of any device or process, or if in case of a sound
recording, the recorded sound or music is audible at a place where persons outside
the normal circle of family and that family's closest social acquaintances are or can be
present.86

Our Ruling

The petition lacks merit.

The Court notes that the petition suffers from infirmities. COSAC did not attach a
Secretary's Certificate or any document showing Sy's authority to sign the Verification
and Certification of Non-Forum Shopping on behalf of COSAC.87 More importantly,
the petition raised issues that were already passed upon by both the RTC and the CA.
Nonetheless, We deem it proper to discuss the pertinent matters regarding
copyrighted music since these tread on fairly new jurisprudential territory.

At the outset, it must be stressed that the alleged acts of infringement occurred on
February 3, 2005 and January 13, 2006, while the Complaint was filed on February 13,
2006. The applicable law then was Republic Act No. 8293 (RA 8293) or the IPC, which
took effect on January 1, 1998,88 prior to its amendment by Republic Act No. 10372
(RA 10372)89 on February 28, 2013. Relevant to this case are the amendments
introduced by RA 10372 in Section 216 of the IPC which classifies the three types of
copyright infringers.90 Although not originally enumerated in RA 8293, the same still
finds support in the earlier law (RA 8293). Similarly, the concept of "just damages"
which may be awarded in lieu of actual damages can be found in RA 8293. We will
expound on these matters in the discussion.
Overview of Copyright

"[A] copyright is the right to literary property as recognized and sanctioned by

positive law; it is an intangible, incorporeal right granted by statute to the author or
originator of certain literary or artistic productions, whereby he or she is invested, for
a specific period, with the sole and exclusive privilege of multiplying copies of the
same and publishing and selling them."91 Relevantly, "[c]opyright, in the strict sense of
the term, is purely a statutory right. It is a new or independent right granted by the
statute, and not simply a pre-existing right regulated by it. Being a statutory grant, the
rights are only such as the statute confers, and may be obtained and enjoyed only
with respect to the subjects and by the persons, and on terms and conditions
specified in the statute. Accordingly, it can cover only the works falling within the
statutory enumeration or description."92

Section 13, Article XIV of the Constitution accords protection to intellectual

properties, including copyright, as follows: "[t]he State shall protect and secure the
exclusive rights of scientists, inventors, artists, and other gifted citizens to their
intellectual property and creations, particularly when beneficial to the people, for
such period as may be provided by law."

The declaration of state policies of the IPC acknowledges that "[t]he use of
intellectual property bears a social function. To this end, the State shall promote the
diffusion of knowledge and information for the promotion of national development
and progress and the common good."93 In line with this, the Court held in ABS-CBN
Broadcasting Corp. v. Philippine Multi-Media System, Inc.94 that intellectual property
protection must be consistent with public welfare, viz.:

[I]ntellectual property protection is merely a means towards the end

of making society benefit from the creation of its men and women of
talent and genius. This is the essence of intellectual property laws, and it
explains why certain products of ingenuity that are concealed from the
public are outside the pale of protection afforded by the law. It also
explains why the author or the creator enjoys no more rights than are
consistent with public welfare.95

Included in the category of copyright are musical works, which is the main subject
of the case at bench.

Musical Works: Covered by Copyright Protection

Musical works are protected by copyright from the moment of creation in

accordance with Sections 172 and 178 of the IPC, which provide:

SECTION 172. Literary and Artistic Works. – 172.1. Literary and artistic
works, hereinafter referred to as "works", are original intellectual
creations in the literary and artistic domain protected from the
moment of their creation and shall include in particular:
 xxxx

(f) Musical compositions, with or without words;

xxxx

SECTION 178. Rules of Copyright Ownership. – Copyright ownership

shall be governed by the following rules:

178.1 Subject to the provisions of this section, in the case of original

literary and artistic works, copyright shall belong to the author of the
work;

x x x x96

Derivative works are likewise protected by copyright, to wit:

SECTION 173. Derivative Works. – 173.1. The following derivative

works shall also be protected by copyright:

(a) Dramatizations, translations, adaptations, abridgments,

arrangements, and other alterations of literary or artistic works; and

(b) Collections of literary, scholarly or artistic works, and compilations

of data and other materials which are original by reason of the
selection or coordination or arrangement of their contents.

173.2. The works referred to in paragraphs (a) and (b) of Subsection

173.1 shall be protected as new works: Provided, however, That such
new work shall not affect the force of any subsisting copyright upon
the original works employed or any part thereof, or be construed to
imply any right to such use of the original works, or to secure or extend
copyright in such original works.97

A musical composition98 is an intangible work of art composed of a combination of

sounds perceptible to the senses. It is separate and distinct from the tangible object
that embodies it, such as a sheet music,99 as described by Section 181 of the IPC:

SECTION 181. Copyright and Material Object. – The copyright is distinct

from the property in the material object subject to it. Consequently, the
transfer or assignment of the copyright shall not itself constitute a
transfer of the material object. Nor shall a transfer or assignment of the
sole copy or of one or several copies of the work imply transfer or
assignment of the copyright.100

As pointed out by Senior Associate Justice Marvic Mario Victor F. Leonen during
deliberations, the IPC also introduces the concept of "fixation" of a performance of a
musical composition in a "sound recording,"101 as follows:
 SECTION 202. Definitions. – For the purpose of this Act, the following
terms shall have the following meanings:

xxxx

202.2. "Sound recording" means the fixation of the sounds of a

performance or of other sounds, or representation of sound, other
than in the form of a fixation incorporated in a cinematographic or
other audiovisual work;

xxxx

202.4. "Fixation" means the embodiment of sounds, or of the

representations thereof, from which they can be perceived,
reproduced or communicated through a device;102

Chapters XII103 and XIII104 of the IPC govern the fixations of sounds in the form of
sound recordings. These chapters provide for the moral rights of the performers, the
rights of producers of sound recordings, and the limitations105 on the said rights.

A distinction exists between a musical composition which is protected by copyright

and the performance or fixation of a musical composition. Such a distinction is
relevant since not only the composers, authors, and publishers, but also the
performers and sound recording producers should be remunerated when the fixation
or performance of their sound recording is being performed in public (although the
focus of this petition is on composers, authors, and publishers as represented by
FILSCAP).

Infringing Activities in the Case at Bench

Yet, before declaring that copyright infringement was committed, the copyright
owner must establish the musical works that were subject of the infringing activity as
well as the existing valid copyright over the said works. This is because copyright is a
statutory right with protections granted by law insofar as those works qualify for the
said protections.106

In this case, it appears that the infringing activities were committed in two ways:
performance by a live band and playing of sound recordings.

With regard to the performance of music by live band, FILSCAP averred that the
members of the live bands performed musical works without the consent of the
copyright holders. However, it is unclear in FILSCAP's allegations whether the bands
altered the musical compositions during their performances, which may be
considered as derivative works. Even so, the use of derivative works does not
downplay the copyright protections accorded to the original work, and should not be
considered as a free ticket to use the said original work without authority. In any case,
FILSCAP did not specify whether the live bands, independently of COSAC, secured
authorization or were parties to any contract which permitted them to publicly
perform the musical works. At most, FILSCAP maintained that COSAC, as the one
which ultimately benefitted from the performances, should have secured the
required authority, and not the live bands themselves. As the owner of the
establishment, COSAC consented to the public performance of these live bands using
copyrighted music.

However, Senior Associate Justice Marvic Mario Victor F. Leonen initially observed
that We cannot automatically accept FILSCAP's argument that establishments lacking
appropriate licenses which do not prohibit live bands from performing copyrighted
songs are infringers under Section 216 of the IPC prior to its amendment by RA
10372.107 Here, it was not clarified during trial if the members of the live bands were
COSAC's employees. If the live bands which performed copyrighted musical works
without license would automatically be considered as COSAC's employees and result
in COSAC's solidary liability, it would be tantamount to expanding the purview of
copyright infringement under [RA] 8293, the applicable law in this case, although the
expanded liability for infringement was only introduced in [RA] 10372, which
contained amendments not applicable to this case.108 This concern would further be
addressed during the discussion, especially regarding COSAC's indirect or vicarious
liability, as it cannot be denied that the playing of live band music still contributed to
the overall benefit which COSAC received.

As regards the playing of specific fixations or sound recordings, it appears that

aside from infringing the copyright of the owners of the musical compositions, the
rights of the performers and producers of the sound recordings to remuneration for
the public performances were likewise breached. Sections 202.9, 209, and 206 of the
IPC provide:

SECTION 202.9. "Communication to the public of a performance or

a sound recording" means the transmission to the public, by any
medium, otherwise than by broadcasting, of sounds of a performance
or the representations of sounds fixed in a sound recording. For
purposes of Section 209, "communication to the public" includes
making the sounds or representations of sounds fixed in a sound
recording audible to the public.109

SECTION 209. Communication to the Public. – If a sound recording

published for commercial purposes, or a reproduction of such sound
recording, is used directly for broadcasting or for other communication
to the public, or is publicly performed with the intention of making and
enhancing profit, a single equitable remuneration for the performer or
performers, and the producer of the sound recording shall be paid by
the user to both the performers and the producer, who, in the absence
of any agreement shall share equally.110

SECTION 206. Additional Remuneration/or Subsequent

Communications or Broadcasts. – Unless otherwise provided in the
contract, in every communication to the public or broadcast of a
 performance subsequent to the first communication or broadcast
thereof by the broadcasting organization, the performer shall be
entitled to an additional remuneration equivalent to at least five
percent (5%) of the original compensation he or she received for the
first communication or broadcast.111

Insofar as sound recordings are concerned however, it would be premature to

make a distinction on the type of performance considering that this was never put
into issue in the proceedings before the RTC until it reached this Court. Stated
differently, FILSCAP, in its pleadings, did not differentiate the modes of playing the
sound recordings. It merely alleged that COSAC committed copyright infringement
when it played copyrighted songs in its establishment through live performance and
sound recordings. Additionally, both the RTC and the CA focused on the finding of
copyright infringement, and did not delve into the methods of playing the sound
recordings. Given this restriction, it would be more judicious to say, specifically for
this case, that COSAC infringed the performing rights of the copyright owners.112

In its complaint, FILSCAP stated that "to have a wonderful dining experience,
[COSAC], as a matter of policy and practice, plays copyrighted musical works within
the premises of its restaurant. This is confirmed by the presence of loud speakers
installed and used within the confines of the restaurant."113 FILSCAP pointed out that
Tanan admitted under oath that the establishment plays music regularly, or every
night114 and that rock bands performed at Off the Grill to provide entertainment to
the public.115 During Tanan's testimony, she disclosed the following details:

Q: You mentioned and I'm curious, because you stated in your Affidavit
that you are an Accountant but you are in-charge of the monitoring
operations of the restaurant?

A: The same.

Q: Which aspect of the operations of the restaurant are you monitoring?

A: The entertainment every night and the payment.

Q: And the payment to?

A: To the entertainers.

Q: So you can confirm to me that music is regularly being played?

A: Every night, sir.

Q: At Off the Grill?

A: Yes, sir.116

xxxx
Q: So every night, you play live music for the entertainment?

A: Yes, sir.

Q: But during the day and even during the night, you also play recorded
music, cd music as background before the band plays?

A: We have a monitor, MTV.

Q: You play? Please say that again?

A: MTV.

Q: You do not play cd music?

A: No, projector, sir.117

xxxx

Q: Earlier, you said, you confirmed to me that music is being played at the
restaurant?

A: Yes, sir.

Q: Will you give me examples of the songs that were played inside the
restaurant?

A: Acoustic songs, sir.

Q: Can you give me the title of the songs that were played that you can
remember has been played inside the restaurant?

A: Somewhere Down the Road, sir.

Q: What else?

A: Through the Fire.118

xxxx

Q: In your Judicial Affidavit, paragraph 4, you mentioned that once music

is played at the airwaves, it already became a public property. What is
your basis for saying this?

A: May kumakanta sa radio so hindi na natin hawak yung kinakanta nila so

sa entertainment po, hindi namin alam kung ano iyong mga kinakanta
ng mga bawat entertainer.
 Q: So, that is just your opinion?

A: Actually hindi po opinion, kasi po iyong sa mga band namin, they have
their own songs na pina-practice so hindi po namin alam kung ano
iyong mga kinakanta nila dahil hindi naman po pinapaalam sa amin for
the night.119

Hence, FILSCAP contended that "by hiring bands and other performers, [COSAC]
made music audible at the Off the Grill Bar and Restaurant, which is a place where
persons outside the normal circle of a family and that family's closest social
acquaintances are or can be present. Furthermore, [COSAC] likewise played, apart
from live music[,] background music and music through monitor or projector. These
are clearly acts of infringement upon the public performing rights owned by FILSCAP
committed by [COSAC] as the public performances were done without the consent of
or license from FILSCAP."120

FILSCAP insisted that COSAC "hired those bands to play music and sing songs in its
establishment to enhance its customers' drinking and dining experience, as well as
improve the general ambience of its establishment. By doing so, [COSAC] hopes to
entice more of the general public to patronize its establishment, more often. This was
thus a business decision of [COSAC], in line with its organizational objective of making
more profits. [COSAC] constituted those bands as its agents when it hired them to
perform for it a service which was geared towards its profit-making purpose. By the
principles of the law of agency, [COSAC] is directly liable for the acts of its agents in
publicly performing copyrighted musical works without the requisite license from
FILSCAP, ergo, [COSAC] is liable for copyright infringement."121

It is interesting to note that FILSCAP places the liability on COSAC as the owner of
the establishment which played the copyrighted music, and not on the live bands that
performed thereat. FILSCAP adds that COSAC "cannot feign ignorance and claim that
it had no idea the bands would play copyrighted musical works as part of the set of
songs they would perform for the event. [COSAC's] control of what music is played in
its establishment is beyond question. If it does not like the music or song being played,
it can easily stop the band from continuing with its performance or order them to
change the song, in the same way that if it does not like the song playing on the radio
or mp3 player, it can easily turn said device off or switch it to another station or
song."122

Notably, FILSCAP avers that COSAC provided the venue and the opportunity where
the bands could publicly perform copyrighted musical works under FILSCAP's
repertoire without the requisite license. Thus, COSAC should be considered as a
"principal by indispensable cooperation." Without COSAC and its establishment, the
bands could not have publicly performed the musical works on the specific time and
place where the infringements occurred.123 It should be noted that with this
allegation, FILSCAP alluded to the kinds of infringers which RA 10372 later introduced,
and which will further be discussed.
 For its part, though, COSAC simply asserts that at night, rock bands perform at Off
the Grill to provide entertainment to the customers,124 and maintains that the bands
or the singers are the ones who are performing or singing the copyrighted works of
the authors and composers.125

Intent to Profit: Economic Rights Under the IPC

Based on FILSCAP's allegations, COSAC benefitted from the performance in public

of copyrighted songs at Off the Grill. While the primary purpose of the establishment
is to generate profit, the restaurant owner should bear in mind that the use or
performance of copyrighted music should not unduly infringe the rights of the
copyright owners or holders. In relation to this, there is a need to revisit the 1987
case of FILSCAP v. Tan126 (Tan).

In Tan, the restaurant hired professional singers who performed musical

compositions to entertain the customers, but without prior authority from FILSCAP
which had rights to the songs. The Court ruled that after release, the songs played in
the establishment already became part of the public domain and thus, no
infringement was committed. However, under the prevailing law at that time, the
musical composition needed to be registered first before the economic rights
attached to the copyright can be enforced. Specifically, the Court then pronounced
that "if the general public has made use of the object sought to be copyrighted for
thirty (30) days prior to the copyright application the law deems the object to have
been donated to the public domain and the same can no longer be copyrighted [and
becomes public property]."127 Later on, the law on intellectual property was amended
(to RA 8293, which was approved on June 6, 1997 but took effect on January 1, 1998)
to state that original works are protected from the moment of creation and no longer
just from the date of registration.

What is relevant in Tan, however, is that the element of profit was considered, in
that ultimately, the establishment derived revenue from the playing of live band
music even if the patrons primarily paid for the food and drinks. Simply put, the public
performance of the musical works was made essentially for the realization of profit. It
should be stressed, however, that Act No. 3134, the prevailing law when Tan was
resolved, expressly mentioned "profit"128 in connection with "performance."
Meanwhile, Sections 171.6 and 177.6 of the IPC no longer mentioned "profit" in
relation to "public performance."129 As such, when considering cases which were filed
after Act No. 3134 was amended, "profit" should not be the controlling factor in
assessing whether one committed copyright infringement after the performance in
public of the musical works, although "profit" would be relevant in evaluating if the
case falls under the limitations on copyright or the fair use doctrine (which will briefly
be mentioned later). Nevertheless, the Court in Tan held that:

In the case at bar, it is admitted that the patrons of the restaurant in

question pay only for the food and drinks and apparently not for listening
to the music. As found by the trial court, the music provided is for the
purpose of entertaining and amusing the customers in order to make the
 establishment more attractive and desirable. It will be noted that for the
playing and singing the musical compositions involved, the combo was
paid as independent contractors by the appellant. It is therefore obvious
that the expenses entailed thereby are added to the overhead of the
restaurant which are either eventually charged in the price of the food
and drinks or to the overall total of additional income produced by the
bigger volume of business which the entertainment was programmed to
attract. Consequently, it is beyond question that the playing and singing
of the combo in defendant-appellee's restaurant constituted
performance for profit contemplated by the Copyright Law. (Act 3134 as
amended by P.D. No. 49, as amended).130 (Citations omitted).

The IPC, before its amendment in 2013, did not distinguish if the public
performance was conducted or made possible by the owners of the establishment,
the performers, or other individuals and entities. Undeniably, however, the
performance in public of the copyrighted works, either directly or by means of any
device or process, reached persons outside the normal circle of a family and that
family's closest social acquaintances. This is how Off the Grill "performed"131 the
copyrighted musical works under FILSCAP's repertoire, even with the knowledge that
the music is protected by copyright with the corresponding exclusive economic rights
pursuant to Section 177 of the IPC, viz.:

SECTION 177. Copyright or Economic Rights. – Subject to the

provisions of Chapter VIII, copyright or economic rights shall consist of
the exclusive right to carry out, authorize or prevent the following acts:

177.1. Reproduction of the work or substantial portion of the work;

177.2. Dramatization, translation, adaptation, abridgment,

arrangement or other transformation of the work;

177.3. The first public distribution of the original and each copy of
the work by sale or other forms of transfer of ownership;

177.4. Rental of the original or a copy of an audiovisual or

cinematographic work, a work embodied in a sound recording, a
computer program, a compilation of data and other materials or a
musical work in graphic form, irrespective of the ownership of the
original or the copy which is the subject of the rental;

177.5. Public display of the original or a copy of the work;

177.6 Public performance of the work; and

177.7 Other communication to the public of the work.132 (Emphases

and underscoring supplied).

Sections 174 and 178 of the IPC similarly provide:

 SECTION 174. Published Edition of Work. – In addition to the right to
publish granted by the author, his heirs, or assigns, the publisher shall
have a copyright consisting merely of the right of reproduction of the
typographical arrangement of the published edition of the work.133

SECTION 178. Rules on Copyright Ownership. – Copyright ownership

shall be governed by the following rules:

178.1. Subject to the provisions of this section, in the case of

original literary and artistic works, copyright shall belong to the author
of the work;

xxxx

178.5. In the case of audiovisual work, the copyright shall belong to

the producer, the author of the scenario, the composer of the music,
the film director, and the author of the work so adapted. However,
subject to contrary or other stipulations among the creators, the
producer shall exercise the copyright to an extent required for the
exhibition of the work in any manner, except for the right to collect
performing license fees for the performance of musical compositions,
with or without words, which are incorporated into the work;134

Copyright Infringement

Since the economic rights provided by the IPC are exclusive in nature, not just
anyone can exercise such rights. In other words, the use of any copyrighted material
without the consent of the copyright owner (or his/her assignee), and which violates
these economic rights, shall amount to copyright infringement.

Infringement of a copyright is a trespass on a private domain owned

and occupied by the owner [or assignee] of the copyright, and, therefore,
protected by law, and infringement of copyright, or piracy, which is a
synonymous term in this connection, consists in the doing by any person,
without the consent of the owner [or assignee] of the copyright, of
anything the sole right to do which is conferred by statute on the owner
[or assignee] of the copyright.135

The gravamen of copyright infringement,' according to NBI-Microsoft Corporation

v. Hwang,136

[I]s not merely the unauthorized 'manufacturing' of intellectual works

but rather the unauthorized performance of any of the acts covered by
Section 5. Hence, any person who performs any of the acts under Section
5 without obtaining the copyright owner's prior consent renders himself
civilly137 and criminally138 liable for copyright infringement.139
 To successfully claim that copyright infringement was committed, the evidence
must show the "(1) ownership of a validly copyrighted material by the complainant;
and (2) infringement of the copyright by the respondent."140

For the first element, as already mentioned, original and derivative works are
protected by copyright from the moment of creation. The copyright owners can then
enforce their rights, especially economic rights, without the need for prior reporting
or recording. In the same way, the copyright owners can assign their rights to an
assignee, and this assignment need not be registered for it to be valid. Thereafter, the
copyright owners or their assignee can properly pursue the protection and
enforcement of these rights.

The second element is comprised of two (2) components: (1) the act of
infringement; and (2) the defendant or respondent who committed the act of
infringement.

Act of Infringement

The first component or the infringing act, "is not merely the unauthorized
'manufacturing' of intellectual works but rather the unauthorized performance"141 of
any of the acts covered by the exclusive economic rights provided under Section 177
of the IPC of the copyright owners or their assignee. Nonetheless, there are instances
when certain acts shall not constitute as infringement, such as those covered by
Section 184 on "Limitations on Copyright" and Section 185 on "Fair Use of a
Copyrighted Work," of the IPC, as follows:

SECTION 184. Limitations on Copyright. – 184.1. Notwithstanding

the provisions of Chapter V, the following acts shall not constitute
infringement of copyright:

(a) The recitation or performance of a work, once it has been

lawfully made accessible to the public, if done privately and free of
charge or if made strictly for a charitable or religious institution or
society;

(b) The making of quotations from a published work if they are

compatible with fair use and only to the extent justified for the
purpose, including quotations from newspaper articles and periodicals
in the form of press summaries: Provided, That the source and the
name of the author, if appearing on the work, are mentioned;

(c) The reproduction or communication to the public by mass media

of articles on current political, social, economic, scientific or religious
topic, lectures, addresses and other works of the same nature, which
are delivered in public if such use is for information purposes and has
not been expressly reserved: Provided, That the source is clearly
indicated;
 (d) The reproduction and communication to the public of literary,
scientific or artistic works as part of reports of current events by means
of photography, cinematography or broadcasting to the extent
necessary for the purpose;

(e) The inclusion of a work in a publication, broadcast, or other

communication to the public, sound recording or film, if such inclusion
is made by way of illustration for teaching purposes and is compatible
with fair use: Provided, That the source and the name of the author, if
appearing in the work, are mentioned;

(f) The recording made in schools, universities, or educational

institutions of a work included in a broadcast for the use of such
schools, universities or educational institutions: Provided, That such
recording must be deleted within a reasonable period after they were
first broadcast: Provided, further, That such recording may not be
made from audiovisual works which are part of the general cinema
repertoire of feature films except for brief excerpts of the work;

(g) The making of ephemeral recordings by a broadcasting

organization by means of its own facilities and for use in its own
broadcast;

(h) The use made of a work by or under the direction or control of

the Government, by the National Library or by educational, scientific or
professional institutions where such use is in the public interest and is
compatible with fair use;

(i) The public performance or the communication to the public of a

work, in a place where no admission fee is charged in respect of such
public performance or communication, by a club or institution for
charitable or educational purpose only, whose aim is not profit making,
subject to such other limitations as may be provided in the Regulations;
(n)

(j) Public display of the original or a copy of the work not made by
means of a film, slide, television image or otherwise on screen or by
means of any other device or process: Provided, That either the work
has been published, or, that the original or the copy displayed has
been sold, given away or otherwise transferred to another person by
the author or his successor in title; and

(k) Any use made of a work for the purpose of any judicial
proceedings or for the giving of professional advice by a legal
practitioner. (Citations omitted).
 184.2. The provisions of this section shall be interpreted in such a
way as to allow the work to be used in a manner which does not
conflict with the normal exploitation of the work and does not
unreasonably prejudice the right holder's legitimate interests.142

SECTION 185. Fair Use of a Copyrighted Work. – 185.1. The fair use
of a copyrighted work for criticism, comment, news reporting, teaching
including multiple copies for classroom use, scholarship, research, and
similar purposes is not an infringement of copyright. Decompilation,
which is understood here to be the reproduction of the code and
translation of the forms of the computer program to achieve the inter-
operability of an independently created computer program with other
programs may also constitute fair use. In determining whether the use
made of a work in any particular case is fair use, the factors to be
considered shall include:

(a) The purpose and character of the use, including whether such
use is of a commercial nature or is for non-profit educational purposes;

(b) The nature of the copyrighted work;

(c) The amount and substantiality of the portion used in relation to

the copyrighted work as a whole; and

(d) The effect of the use upon the potential market for or value of
the copyrighted work.

185.2. The fact that a work is unpublished shall not by itself bar a
finding of fair use if such finding is made upon consideration of all the
above factors.143 (Emphasis supplied).

It can thus be inferred that the copyright owners do not have the unlimited and
absolute right to limit, restrict, authorize or permit the performances of their works,
based on Sections 184 and 185 of the IPC. Nonetheless, the parties in this case did not
raise as issues the application of limitations on copyright and the concept of fair use.
Even so, a brief yet necessary discussion on these two fundamental concepts is useful.

The limitations on copyright specify the situations which, although involving the
use of copyrighted material, do not amount to infringement. In particular, paragraph
(i) of Section 184 of the IPC provides that for a performance to be exempt, these
requisites should be satisfied:144

(i) The place where the performance is made does not charge any admission fee in
respect of such performance or communication;

(ii) The performance is made by a club or institution: (a) for charitable or educational
purpose only; and (b) whose aim is not profit making; and
(iii) Such other requirements that may be prescribed under the implementing rules and
regulations promulgated by the Director General of the [IPO].

For the first requisite, charging an admission fee does not automatically remove
the playing of copyrighted music from this exemption. But if the admission fee is
"charged in respect of such performance" then it would not be covered by the
exemption. Otherwise stated, charging an admission fee for some other purpose not
in connection with the playing of the work could still be exempt under this
provision.145

Regarding the second requisite, the club or institution should both be for a
charitable or educational purpose and not for profit,146 in that "no net income or
asset accrues to or benefits any member or specific person, with all [its] net income
or asset[s] devoted to the institution's purposes and all its activities conducted not for
profit."147 A charitable institution should be one that "provide[s] for free goods and
services to the public which would otherwise fall on the shoulders of the
government,"148 while an educational institution should be a school, seminary, college,
or other similar educational establishment under the formal school system.149

As for the fair use doctrine, the case of ABS-CBN Corporation v. Gozon150 (Gozon)
described it as "'a privilege to use the copyrighted material in a reasonable manner
without the consent of the copyright owner or as copying the theme or ideas rather
than their expression.'151 Fair use is an exception to the copyright owner's monopoly
of the use of the work to avoid stifling 'the very creativity which that law is designed
to foster.'"152 Gozon continues to state that "in its current form, the [IPC] is malum
prohibitum and prescribes a strict liability for copyright infringement. Good faith, lack
of knowledge of the copyright, or lack of intent to infringe is not a defense against
copyright infringement. Copyright, however, is subject to the rules of fair use and will
be judged on a case-to-case basis."153

Pertaining to the fair use doctrine, Gozon elucidates:

Determining fair use requires application of the four-factor test.

Section 185 of the Intellectual Property Code lists four (4) factors to
determine if there was fair use of a copyrighted work:

a. The purpose and character of the use, including whether such

use is of a commercial nature or is for non-profit educational purposes;

b. The nature of the copyrighted work;

c. The amount and substantiality of the portion used in relation to

the copyrighted work as a whole; and

d. The effect of the use upon the potential market for or value of
the copyrighted work.
 First, the purpose and character of the use of the copyrighted
material must fall under those listed in Section 185, thus: 'criticism,
comment, news reporting, teaching including multiple copies for
classroom use, scholarship, research, and similar purposes.' The
purpose and character requirement is important in view of copyright's
goal to promote creativity and encourage creation of works. Hence,
commercial use of the copyrighted work can be weighed against fair
use.

The 'transformative test' is generally used in reviewing the purpose

and character of the usage of the copyrighted work. This court must
look into whether the copy of the work adds 'new expression, meaning
or message' to transform it into something else. 'Meta-use' can also
occur without necessarily transforming the copyrighted work used.

Second, the nature of the copyrighted work is significant in deciding

whether its use was fair. If the nature of the work is more factual than
creative then fair use will be weighed in favor of the user.

Third, the amount and substantiality of the portion used is

important to determine whether usage falls under fair use. An exact
reproduction of a copyrighted work, compared to a small portion of it,
can result in the conclusion that its use is not fair. There may also be
cases where, though the entirety of the copyrighted work is used
without consent, its purpose determines that the usage is still fair. For
example, a parody using a substantial amount of copyrighted work
may be permissible as fair use as opposed to a copy of a work
produced purely for economic gain.

Lastly, the effect of the use on the copyrighted work's market is

also weighed for or against the user. If this court finds that the use had
or will have a negative impact on the copyrighted work's market, then
the use is deemed unfair.154 (Emphases supplied, citations omitted)

These four factors should be considered together in establishing a case hinged on

fair use, as these are not individually conclusive.155

First Factor of Fair Use: The Purpose and Character of the Use

The purpose and character of the use of the copyrighted work, whether it is for
commercial or nonprofit educational purposes, should be determined. Thus, "if the
new work clearly has transformative use and value, a finding of fair use is more likely
even if the user stands to profit from his or her new work. Conversely, if the new work
merely supplants the object of the original work, i.e., it has no transformative
value, and is commercial in nature, the first factor will most likely be weighed against
a finding of fair use. Needless to state, if the new work has transformative use and
value, and was created for a noncommercial purpose or use, the scale will highly likely
be swayed in favor of fair use."156 To illustrate, examples of transformative use are
those listed in Section 185 of the IPC, i.e., for criticism, comment, news reporting,
teaching, scholarship, research, and similar purposes.157

Second Factor of Fair Use: The Nature of the Copyrighted Work

In this factor, such "calls for recognition that some works are closer to the core of
intended copyright protection than others, with the consequence that fair use is more
difficult to establish when the former works are copied."158 For example, the fair use
defense carries more weight in case of factual works compared to fiction and fantasy,
since generally, there is a greater need to disseminate the former than the
latter.159 Similarly, if the copied work is unpublished, such is a clear indication of its
"nature," as the "scope of fair use is narrower with respect to unpublished
works."160 Hence, "the closer the work is to the core of copyright protection – i.e., the
more creative, imaginative, or original the copied work is, the more likely will fair use
be rejected as a defense against infringement."161

Third Factor of Fair Use: The Amount and Substantiality of the Portion Used

This factor relates to the reasonableness of the amount and substantiality of the
portion used concerning the copyrighted material as a whole. Additionally, focus must
be directed on whether the amount of copying leads to a valid and transformative
purpose, which is related to the first factor (the purpose and character of use), even if
the entire work is copied but is hinged on a different function compared to the
original.162

Fourth Factor of Fair Use: The Effect of the Use Upon the Potential Market for or Value
of the Copyrighted Work

Considered as the most important element of fair use,163 the last factor "requires
the courts to consider not only the extent of market harm caused by the particular
actions of the alleged infringer, but also 'whether unrestricted and widespread
conduct of the sort engaged in by the defendant ... would result in substantially
adverse impact on the potential market' for the original"164 and derivative works.165

In [Hustler Magazine v. Moral Majority, Inc.], the US Court held that in

order to determine the potential harm to a copyrighted work, the courts
should focus on whether the infringing use: (1) 'tends to diminish or
prejudice the potential sale of the work; (2) tends to interfere with its
marketability of the work; or (3) fulfill the demand for the original
work.'166 In this case, the US Court considered the following factors in
concluding that the impact of defendant's use of plaintiff's work was nil:
(a) the plaintiff's work was first issued or released long before
defendant's mailings went out; (b) 'the effect on the marketability of back
issues of the magazine is de minimis because it is only one page of a
publication'; and (c) defendant's uses did not cause plaintiff any
 competitive injury since defendant was not selling or distributing copies
of the ad parodies to plaintiff's followers.167

Thus,"[w]here the profit generated by the alleged infringement substitutes for

what the owner or creator could make, this bars the concept of fair use. But where
the benefits are complementary or incidental, then fair use may be properly
considered."168

In any case, the playing of music in Off the Grill was not done privately, and the
establishment is not a charitable or religious institution or society. Additionally, the
playing of the creative copyrighted music in Off the Grill was commercial in nature,
and will work against the copyright owners' interests. Thus, COSAC's acts did not fall
under the said limitations and the fair use doctrine.

In other words, the playing of musical compositions or sound recordings at Off the
Grill, regardless of the medium used, whether via live band or through the use of
speakers or monitors, does not fall under any of the limitations or the concept of fair
use. Notably, the IPC did not provide parameters to determine how an entity or
individual would be deemed as exempt in certain instances. There is no law, rule or
previous jurisprudence delineating the treatment for copyright music infringers,
whether it be big businesses ("large-scale users") or small establishments ("small-
scale users"). Additionally, the IPC did not expressly make distinctions as to the
possible levels of liabilities or exemptions if the copyrighted music would be played
using different media. It did not categorize the "treatments" per medium, if the use
would be sourced from a television/radio broadcast, personal recordings through a
CD or mp3s, music videos, etc. Hence, where the law does not distinguish, We must
not distinguish.169

This is noticeably different from other jurisdictions, as the laws in some countries
distinguished the kind of medium used, and specified the quantity as well as the area
of coverage of the establishment before one can be considered as exempt. In Our
jurisdiction, the IPC did not make a distinction on: (a) the area of coverage of the
establishment; (b) the number of loud speakers or television monitors used; (c) the
transmission of the reception; and, (d) the entrance or admission fees to an
establishment, for an entity to be considered as exempt from the licensing fees.170

These matters could have been properly delineated and clarified if the provisions
of the IPC were supplemented by implementing rules and regulations or actually
amended to address the changing milieu of copyrighted musical works. It would have
been informative with respect to copyrighted musical works which have many facets,
classifications, and media. Still, these concerns would be better addressed by the
legislative department, considering the social function or common good element of
intellectual property creations as well as the aim to balance the interests of the
copyright owners and the public. Regardless, the IPC, specifically the prevailing
version at the time COSAC allegedly committed infringing acts, states that public
performance can be done "either directly or by means of any device or
process" or "making the recorded sounds audible at a place or at places where
persons outside the normal circle of a family and that family's closest social
acquaintances are or can be present."

Nevertheless, a discussion on these specifications would also be premature since

none of the parties raised this as an issue. More importantly, it was established that
regardless of the medium used, COSAC allowed the playing of copyrighted music in its
restaurant.

It should be noted, though, that the copyright owners' economic rights are hinged
on profit, in the sense that the valid use of the copyrighted works serves as
reasonable compensation for the owners' hard work, and to further urge them to
create or develop more materials.171 Even so, the key objective is "to encourage the
production of original literary, artistic, and musical expression for the public
good."172 Additionally, "[t]he primary purpose of copyright law is not so much to
protect the interests of the authors/creators, but rather to promote the progress of
science and the useful arts – that is – knowledge. To accomplish this purpose,
copyright ownership encourages authors/creators in their efforts by granting them a
temporary monopoly, or ownership of exclusive rights for a specified length of time.
However, this monopoly is somewhat limited when it conflicts with an overriding
public interest, such as encouraging new creative and intellectual works, or the
necessity for some members of the public to make a single copy of a work for [non-
profit], educational purposes."173

In the same vein, the Supreme Court of the United States (US Supreme Court) held
in Twentieth Century Music Corp. v. Aiken174 that:

The limited scope of the copyright holder's statutory monopoly, like

the limited copyright duration required by the Constitution, reflects a
balance of competing claims upon the public interest: creative work is to
be encouraged and rewarded, but private motivation must ultimately
serve the cause of promoting broad public availability of literature, music,
and the other arts. The immediate effect of our copyright law is to secure
a fair return for an 'author's' creative labor. But the ultimate aim is, by
this incentive, to stimulate artistic creativity for the general public good.
'The sole interest of the United States and the primary object in
conferring the monopoly,' this Court has said, 'lie in the general benefits
derived by the public from the labors of authors.'175

With these considerations, it appears that, as noted by then Senior Associate

Justice Estela M. Perlas-Bernabe176 (SAJ Bernabe, Ret.) during the deliberations prior
to her retirement, there is a balancing of interests between the copyright owners (or
their assignees) and the public who benefit from the use of copyrighted materials. As
can be gleaned from Sections 184 and 185 of the IPC, the "unauthorized use" of
copyrighted works may be allowed and not characterized as infringement. Notably,
such permitted "use" of copyrighted works has a non-profit aspect, such as for
educational, charitable, judicial, scientific, or other recognized purposes under the
law.177 The "use" in the said fields will not significantly or unfavorably impact the
copyright holders' exclusive economic rights, but will be in consonance with the policy
that copyright laws should promote creativity and knowledge for the good of the
public.

To emphasize, for an act to be considered as copyright infringement, it must not

fall under Section 177 of the IPC, and at the same time must not be covered by
Sections 184 (Limitations on Copyright) and 185 (Fair Use Doctrine).

Persons Who Commit Acts of Infringement

For the second component of the second element, based on Sections 216 and
216.1 of the IPC, "any person infringing a right protected under [the IPC] shall be
liable x x x." This provision was subsequently refined by the passage of RA 10372178 in
2013. Specifically, RA 10372 distinguished the "roles" of an infringer as follows: (1)
directly commits an infringement; (2) benefits from the infringing activity of another
person who commits an infringement if the person benefiting has been given notice
of the infringing activity and has the right and ability to control the activities of the
other person; and (3) with knowledge of the infringing activity, induces, causes or
materially contributes to the infringing conduct of another.179

SAJ Bernabe, Ret. opines180 that Sections 216 and 216.1 of the IPC, as amended by
RA 10372, contemplate two (2) different kinds of copyright infringers, specifically:
(a) primary infringers or those who directly commit the infringing acts; and
(b) secondary infringers or those who induce, materially contribute to, or benefit from,
an infringing act of another. It should be stressed, though, that since RA 10372 was
enacted in 2013, or after COSAC allegedly committed the infringing acts, the original
provisions of RA 8293 should be controlling in this case. Basically, the enumeration
pertaining to the different types of infringers provided by RA 10372 cannot strictly
apply in the instant case.

Yet, as aptly explained by SAJ Bernabe, Ret.:

Despite the seeming lack of recognition of the dichotomy between

primary and secondary infringers under the original Sections 216 and
216.1 [of RA 8293, it is nevertheless submitted that the phrase '[a]ny
person infringing a right protected under this law shall be liable x x x' may
be interpreted to be broad enough to include all those who had a part
with the infringing activity, whether directly (primary infringers) or
indirectly (secondary infringers) – and that the RA 10372 amendments
should be considered as a mere refinement of the phraseology of the
coverage of copyright infringement meant only to explicitly codify what
was already implied in the old law in order to further strengthen the
enforcement of copyright-related rights.181

She adds that this view is supported by copyright law and related jurisprudence in
the United States (US), which hold persuasive value in the Philippine jurisdiction given
that our country's copyright laws trace its roots from the US.182 For instance, the
Copyright Act of 1976 of the US is now reflected as Title 17 of the US Code (17 USC).
17 USC § 501 (a),183 just like Sections 216 and 216.1 of the IPC, does not enumerate
the different types of infringers, as it merely states "anyone who violates" the rights
of the copyright owner or author. Simply put, the said provisions do not expressly
provide for liability characterized as secondary infringement. Even so, US
jurisprudence,184 based on common law principles, recognizes that liability
characterized as secondary infringement should be penalized. Relevantly, in Metro-
Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.185 (MGM), the US Supreme Court ruled
that "[a]lthough '[t]he Copyright Act does not expressly render anyone liable for
infringement committed by another,' these doctrines of secondary liability emerged
from common law principles and are well established in the law." Thus, as opined by
SAJ Bernabe, Ret., since the legal system of the Philippines is "a blend of customary
usage, and Roman (civil law) and Anglo-American (common law) systems,"186 We can
adopt the view regarding common law principles related to secondary infringement.
Thus, secondary infringers may be recognized and penalized, given the persuasive
nature of US law in connection with Philippine law and in order to complement the
old Sections 216 and 216.1 of the IPC.

In relation to this, under US law, copyright infringement is seen in the nature of a

tort, and all those who take part in the infringing act are jointly and severally
liable.187 The US cases of EMI April Music, Inc. v. White,188 Shapiro v. H L. Green
Co.,189 and MGM, clarified that a person can be held liable for copyright infringement
based on the acts of another – if one benefits from the infringing act; if a person
contributes to the infringement by inducing direct infringing acts; or infringes
vicariously by profiting from direct infringement while declining to exercise a right to
stop/limit it.

US case law also provides for sub-classifications of secondary liability, as follows: (a)
inducement theory; (b) contributory infringement; and (c) vicarious infringement.

Under the inducement theory, when a person induces the commission of an

infringing act by another party, or persuades another to commit infringement, he/she
shall be liable.190 Next, contributory infringement happens when a person, aware of
the infringing activity, induces, causes or materially contributes to the infringing act of
another.191

Finally, vicarious infringement has two (2) elements: (1) a defendant possesses the
right and ability to supervise the infringing act; and (2) the defendant must have "an
obvious and direct financial interest in the exploitation of copyrighted material."192 In
this mode, knowledge or lack thereof of the infringement is immaterial in the
determination of vicarious liability.193

The US case of ABKCO Music, Inc. v. Washington194 ruled that the secondary
liability of an infringer may be founded on both contributory and vicarious
infringement, as when the secondary infringer has a financial interest in the act of
infringement and also materially contributed to the commission of the said act.
 Therefore, to hold a defendant or respondent liable, the evidence must show that
he or she is either a direct infringer or a secondary infringer, in relation to the
exclusive economic rights of a copyright owner (or assignee) which are not covered by
the fair use doctrine or the limitations on copyright under the IPC.

Copyright Infringement: COSAC's Liability

All the elements of copyright infringement, (1) ownership of a validly copyrighted

material by the complainant and (2) infringement of the copyright by the respondent,
are present in this case. The songs that were played in Off the Grill are copyrighted
works, and the copyright owners have a right to enforce their exclusive economic
rights. COSAC, through the testimony of Tanan, admitted that it allowed the playing of
the copyrighted songs in the restaurant. Such performances were not covered by the
limitations on copyright or the fair use doctrine. More importantly, these were carried
out to realize profits for the establishment. Ergo, COSAC committed copyright
infringement.

To be more precise, COSAC is a primary infringer, and also a secondary infringer

under the concept of vicarious infringement. This is because as owner of Off the Grill,
it allowed the commission of infringing acts when it permitted musical artists or bands
to perform copyrighted music (secondary infringer), and played sound recordings as
background music (primary infringer) without first procuring a license from the
copyright owners (or assignees) of the songs and paying the fee. By doing so, COSAC
unduly enriched itself when it allowed the playing in public of copyrighted songs
which in turn paved the way for it to generate more profit without any additional
expense to it. This contravenes the aim of copyright laws to protect and compensate
authors and the artists, as well as encourage them to produce more creations for the
eventual benefit of the public. FILSCAP's allegation that COSAC is a principal by
indispensable cooperation, in a way, finds basis in this rationale.

Designation of FILSCAP

In view of these, the copyright owners of the musical works can rightly assert their
economic rights when their copyrighted songs are being played or performed without
their consent or authorization. FILSCAP even asserted that notice and demand from
the copyright owner is not required for the infringer to be liable for copyright
infringement.195 To effectively enforce their economic rights, the copyright owners
can designate a society of artists, writers or composers on their behalf, like FILSCAP,
as provided by Section 183196 of the IPC. This designation is achieved through deeds
of assignment, exactly how various copyright owners had assigned to FILSCAP the
protection and enforcement of their rights on their behalf. The deeds of assignment
between FILSCAP and the copyright owners contained the following pertinent
provisions:

1. DEFINITIONS

a) "Copyright work" shall mean and include –

 xxxx

b) "right of public performance" shall, as provided in Section 171.6

of [the IPC] x x x

c) "right of communication to the public" shall mean the right... per

Section 171.3 of [the IPC]

d) The expression "public performing rights" shall mean (b) [right of

public performance] and (c) [right of communication to the public]
above.

2. ASSIGNMENT OF PUBLIC PERFORMING RIGHTS

a. ASSIGNOR assigns to FILSCAP, the PUBLIC PERFORMING RIGHTS

in ALL copyright works x x x, together with all interests and shares of
the ASSIGNOR x x x

b. FILSCAP shall own, hold, control, administer and enforce said

public performing rights on an exclusive basis x x x.

c. ASSIGNOR shall x x x make, constitute and appoint FILSCAP as

his/her true and lawful attorney, with full power and authority to
execute all documents and do all acts, including licensing of the rights
herein assigned, that may be necessary, proper or expedient to
effectively administer/enforce the public performing rights of
ASSIGNOR in all his/her copyright works.

xxxx

5. DISTRIBUTION OF ROYALTIES

a. FILSCAP shall from time to time pay ASSIGNOR such sums of

money out of the royalties FILSCAP has collected from the exercise or
licensing of the rights herein assigned in accordance with the
distribution guidelines set by the FILSCAP Board of Trustees.

x x x x197

In like manner, the reciprocal representation agreements executed by the foreign

societies in favor of FILSCAP essentially stipulated the following:

[They] assign to FILSCAP the performing right x x x, in the territories

in which this latter Society operates x x x, and the right to authorize all
public performances x x x of musical works, with or without lyrics,
which are protected under the terms of national laws, bilateral treaties
and multilateral international conventions relating to the author's right
(copyright, intellectual property, etc.) x x x.
 The assignment of the performing right as referred to x x x entitles
each of the contracting Societies, x x x

a) to permit or prohibit x x x public performance of works in the

repertoire of the other Society and to issue the necessary
authorizations for such performances;

b) to collect all royalties required in return for the authorizations

issued by it x x x;

c) to receive all sums due as indemnification or damages for

unauthorized performances of the works in question;

d) to commence and pursue x x x any legal action against any

person or corporate body and any administrative or other authority
responsible for illegal performance of the works in question;

e) to transact, compromise, submit to arbitration, refer to any Court

of Law special or administrative tribunal;

f) to take other action for the purpose of ensuring the protection of

the public performance right in the works covered by the present
contract.198

It should be mentioned that "at most, an assignee can only acquire rights
duplicating those which his assignor is entitled by law to exercise."199 Necessarily,
FILSCAP's scope of authority is limited by what the deeds or agreements specifically
provide. Relevantly, too, FILSCAP alleged that it represents "composers,
lyricists/authors, and music publishers." As additional information, since FILSCAP is
currently recognized and accredited by the IPO200 as a Collective Management
Organization (CMO),201 it essentially has the personality to step in to protect the rights
of copyright owners, specifically composers, lyricists, music publishers, and other
music copyright owners,202 as long as the copyrighted songs are under FILSCAP's
catalogue.

Therefore, FILSCAP, as the assignee, "is entitled to all the rights and remedies
which the assignor had with respect to the copyright."203 If FILSCAP determines that
there is an infringement of the copyrighted musical works, it can pursue appropriate
measures to protect its rights and that of the assignors. The remedies for
infringement relevant to the instant case are stated in Section 216 of the IPC, prior to
its amendment by RA 10372 in 2013, as follows:

SECTION 216. Remedies for Infringement. 216.1. Any person infringing

a right protected under this law shall be liable:

(a) To an injunction restraining such infringement. The court may

also order the defendant to desist from an infringement, among others,
to prevent the entry into the channels of commerce of imported goods
 that involve an infringement, immediately after customs clearance of
such goods.

(b) Pay to the copyright proprietor or his assigns or heirs such actual
damages, including legal costs and other expenses, as he may have
incurred due to the infringement as well as the profits the infringer
may have made due to such infringement, and in proving profits the
plaintiff shall be required to prove sales only and the defendant shall
be required to prove every element of cost which he claims, or, in lieu
of actual damages and profits, such damages which to the court shall
appear to be just and shall not be regarded as penalty.

xxxx

(e) Such other terms and conditions, including the payment of

moral and exemplary damages, which the court may deem proper,
wise and equitable and the destruction of infringing copies of the work
even in the event of acquittal in a criminal case.

x x x x204 (Emphasis Supplied).

COSAC failed to rebut FILSCAP's claim that Off the Grill played copyrighted music
either through a live band or sound recordings without any license from the Society.
As the assignee, FILSCAP rightly sought to protect the copyrighted musical works by
requiring COSAC, through demand letters, to procure the authorization to play the
songs and also to pay the corresponding fees. Since COSAC refused to comply,
FILSCAP properly resorted to filing a complaint before the trial court to compel COSAC
to secure a license and pay the fees before conducting or allowing any further
performance of the copyrighted songs at Off the Grill.

Registration Not Required; For

Recording Purposes Only

With the presentation of the certifications205 from the National Library and the
deeds of assignment206 of various musical artists in its favor, FILSCAP was able to
establish its authority to enforce the rights of the assignors, especially when an
establishment plays the copyrighted music without a "license." The same applies to
the foreign societies' copyrighted music, with the corresponding certification from the
National Library of the reciprocal representation agreements.207

Even so, COSAC argues that FILSCAP should have caused the publication of the
deeds of assignment and the reciprocal representation agreements in the IPO Gazette
to properly inform the public of its authority. We are not persuaded. Section 182 of
the IPC provides:

Section 182. Filing of Assignment or License. – An assignment or

exclusive license may be filed in duplicate with the National Library upon
payment of the prescribed fee for registration in books and records kept
 for the purpose. Upon recording, a copy of the instrument shall be
returned to the sender with a notation of the fact of record. Notice of the
record shall be published in the IPO Gazette.208

Thus, if the author or assignee opts to file a duplicate of the deed or agreement, a
record of the said filing will be kept by the National Library. A notation of the fact of
record shall be given to the sender or the filer. Thereafter, a notice of the said record
shall be published in the IPO Gazette. Withal, the provision suggests that filing a
duplicate of the document assigning the rights to copyrighted musical works is
permissive and not mandatory upon the author or the assignee.

As uniformly found by both the RTC and the CA, the filing of a duplicate copy of
the deed of assignment or the reciprocal representation agreement with the National
Library is not required. Instead, filing a duplicate copy of the deed or agreement with
the National Library is discretionary on the part of either the author or the assignee.
Since the filing is optional, the authors or their assignees cannot be compelled to file a
duplicate copy of the document evidencing the assignment, and have the deeds or
agreements published in the IPO Gazette before their rights can be invoked or
enforced.

FILSCAP aptly stated that "[c]onsidering that the Deeds of Assignment and
Reciprocal Agreements are not required to be registered with the National Library,
then much less is their publication in the IPO Gazette required. The filing of the
assignment of copyright is a pre-requisite for publication, such that if no assignment is
filed, then there can be no publication to speak of."209

In addition, the Court sustains FILSCAP's fitting explanation regarding the intent of
the framers of the IPC, when juxtaposed with Presidential Decree (PD) No. 49, the
preceding law, and other provisions in the IPC, as follows:

85. Furthermore, an analysis of the legislative history of Section 182

of the IP Code, as well as a comparison of the said provision with the
other provisions of the IP Code will confirm that there is no question
that the filing of copyright assignment instruments with the National
Library is not mandatory and that the failure to file the said
instruments will not render the instrument void as to third persons.

86. Prior to Section 182 of the IP Code, Presidential Decree No. 49,
promulgated on 14 November 1972, mandated the filing of the
assignment of a copyright with the National Library and provided a
penalty for non-compliance, to wit:

'SECTION 19. Every assignment, license or other instrument relating

to any right, title or interest in a copyright and to the work subject to
it shall be filed in duplicate with the National Library upon payment of
the prescribed fee for registration in books and records kept for the
purpose. Upon recording, a copy of the instrument shall be returned to
 the sender with a notation of the fact of record. Notice of the record
shall be published in the Official Gazette.

Such [instrumentalities]210 shall be void as against any subsequent

purchaser or mortgagee for valuable consideration and without notice
unless it is recorded in the library prior to the subsequent purchase or
mortgage.'

87. Obviously, if it were the intention of the Philippine Congress to

make it mandatory to file the assignment of copyright with the
National Library, the second paragraph in Section 19 of PD No. 49 as
quoted above should have been retained in Section 182 of the IP Code.
It was not.

88. The permissive character of registration of assignment of

copyright is likewise highlighted by a comparison of the provisions of
the IP Code on registration of an assignment of copyright as against
the IP Code provisions on registration of trademark assignment and
patent assignment.

88.1 Registration with IPO is required for assignments, licenses and

other instruments relating to the transmission of any right, title or
interest in and to inventions, and patents or application for patents or
inventions within three (3) months from the date of the instrument, or
prior to a purchase or mortgage. If the instrument is not registered, it
is void as against a subsequent purchaser or mortgagee for valuable
consideration and without notice.

88.2 The IP Code likewise requires IPO recording of assignments

and transfers of trademark application or registration for the same to
be effective against third parties. The rule is likewise the same for
license contracts involving a trademark application or registration.211

Simply put, if the legislative intent was to void the deeds or agreements in case of
non-publication in the IPO Gazette, then a provision requiring said publication should
have been expressly stated in the IPC. Absent such a provision, there is no basis to
conclude that non-publication in the IPO Gazette of copies of the deeds or
agreements would automatically render void these documents.

Notably, under the old copyright laws,212 registration and deposit of the work were
required before it can be protected. In the aforementioned Tan case, which was
decided under these old copyright laws, the Court ruled that while the acts of the
respondent in playing live band music in the restaurant constituted as copyright
infringement, he could not be held liable since the owners of the musical works did
not comply with the formalities required by the old copyright laws. Such failure
constituted as a waiver on the owners' part to enforce their copyright ownership, and
thus, they cannot enjoy copyright protection over their works. As a consequence,
their musical works became property of the public domain.

Yet, pursuant to the Berne Convention,213 of which the Philippines is a signatory,

the enjoyment of rights protected by copyright "shall not be subject to any formality;
such enjoyment and such exercise shall be independent of the existence of protection
in the country of origin of work."214 Hence, in the past, while formalities were
required before a work may be protected, the country's copyright laws later on
shifted to conferring protection from the moment of creation.215 Accordingly, under
the IPC, original and derivative works are protected by the sole fact of their creation,
irrespective of their mode or form of expression, as well as of their content, quality
and purpose,216 and shall extend during the life of the author and for fifty (50) more
years after his/her death.217

Again, as SAJ Bernabe, Ret. stated, while the IPC still provides pointers regarding
the registration and deposit of copyrighted works, the objective for doing so is
for recording only. Such recording will not affect the copyright's validity, including the
rights and protections that are attached to it. Withal, failure to register an assignment
or licensing agreement involving copyrighted works should not impact the validity of
such transactions.218 Rather, the purpose of registration is to protect subsequent
purchasers or mortgagees for value and without notice, since in principle, it is similar
to the filing and recording statute pertaining to chattel mortgages.219 Thus, FILSCAP,
as the assignee in this case, can register and deposit copyrighted works on behalf of
the authors/owners but only with the aim to successfully record the same.

In fine, non-registration or deposit of the works with the National Library will not
affect the validity of the copyright, as these works are protected from the moment of
creation, and given that the registration is purely for recording purposes. To stress,
copyright holders or their assignees have the basis to enforce their rights and take
action against any person or entity who infringes on the said rights even absent such
recording.

FILSCAP's Remedies

As the assignee, FILSCAP has the right to demand compensation for the playing or
performance in public of copyrighted musical works under its catalogue in
establishments or other venues, when infringement is being committed due to the
absence of a license and payment of fees.

Relevantly, the RTC granted FILSCAP actual damages representing unpaid license
fees/royalties as well as monitoring expenses (both with legal interest), attorney's
fees and litigation expenses, and costs of suit. However, the RTC did not grant
FILSCAP's prayer to compel COSAC to secure a public performance license and to pay
for the fees. Since FILSCAP did not appeal these aspects, these are deemed waived
and considered to have become final as against it.220 It should be emphasized,
however, that failure to procure a license from FILSCAP and pay the necessary fees
before allowing the playing or public performance of copyrighted works will still
amount to copyright infringement. Nonetheless, the CA upheld the RTC's ruling on
license fees/royalties but ordered the deletion of award for monitoring expenses,
which FILSCAP did not question as well.

In the case at bench, since COSAC committed infringement, FILSCAP, representing

the copyright owners, is entitled to compensation in the form of damages. In its
complaint, FILSCAP expressly prayed for nominal damages in the amount of
₱300,000.00.221 Had FILSCAP asked for actual damages, further assessment of the
evidence would have been required. "Under Article 2199 of the Civil Code, actual or
compensatory damages are those awarded in satisfaction of, or in recompense for,
loss or injury sustained. They proceed from a sense of natural justice and are
designed to repair the wrong that has been done, to compensate for the injury
inflicted and not to impose a penalty."222

To expound, "[t]he Court in San Miguel Foods, Inc. v. Magtuto223 reiterated that
there are two kinds of actual or compensatory damages: (1) the loss of what a person
already possesses, and (2) the failure to receive as a benefit that which would have
pertained to them. In the latter instance, the familiar rule is that damages consisting
of unrealized profits, frequently referred to as ganacias frustradas or lucrum
cessans, are not to be granted on the basis of mere speculation, conjecture, or
surmise, but rather by reference to some reasonably definite standard such as market
value, established experience, or direct inference from known circumstances.224 Thus,
to justify a grant of actual or compensatory damages, it is necessary to prove with a
reasonable degree of certainty, premised upon competent proof and on the best
evidence obtainable by the injured party, the actual amount of loss."225

FILSCAP's evidence is lacking in terms of the "actual" damage it sustained. It did

not offer other receipts or documentation, except for what Lejano presented when
he visited Off the Grill, as well as the matrix of fees submitted by FILSCAP's employees.
There is no effective way to ascertain how much pecuniary loss FILSCAP incurred with
respect to license fees as well as monitoring expenses. For this reason, the RTC and
CA's award to FILSCAP for license fees/royalties should also be removed, in addition
to the monitoring expenses which the CA already deleted. FILSCAP's evidence,
unfortunately, is insufficient to properly calculate its entitlement to royalties, as well
as other actual damages, assuming it further prayed for the same, apart from the
license fees and monitoring expenses.

Moreover, FILSCAP, through Lejano, only monitored Off the Grill on February 3,
2005 and January 13, 2006, even when it averred that the establishment has been
committing infringing acts for a while. Two dates can hardly be considered as an
accurate representation of all the instances when COSAC should have paid the license
fees. Even if FILSCAP specifically prayed for actual damages, the Court cannot grant it
because FILSCAP did not present "sufficient evidence to prove the amount claimed
and the basis to measure actual damages."226 In fine, allegations should always be
supported by preponderant evidence227 to successfully claim for actual damages and
remuneration of lost profits.
 This is not to say, however, that FILSCAP cannot be granted any kind of damages.
Even if it failed to substantiate its entitlement to actual damages, according to RA
8293 or the IPC (prior to its amendment in 2013), FILSCAP can still claim some form of
compensation. Specifically, RA 8293 states that: "in lieu of actual damages and
profits, such damages which to the court shall appear to be just"228 may be awarded
to address a claim of pecuniary loss.229 For this Court, "just damages" is a form of
compensation akin to temperate damages, viz.:

Article 2224. Temperate or moderate damages, which are more than

nominal but less than compensatory damages, may be recovered when
the court finds that some pecuniary loss has been suffered but its
amount cannot, from the nature of the case, be provided with
certainty.230

In the same way, jurisprudence teaches that "[w]hen the court finds that some
pecuniary loss has been suffered but the amount cannot, from the nature of the case,
be proved with certainty, temperate damages may be recovered. Temperate
damages may be allowed in cases where from the nature of the case, definite proof of
pecuniary loss cannot be adduced, although the court is convinced that the aggrieved
party suffered some pecuniary loss."231 Nonetheless, "[i]t must be stressed that the
grant of temperate damages, albeit subject to the discretion of the court,232 must
always be reasonable233 and based on the facts and circumstances of each
case.234 Indeed, this Court's discretion is subject to the condition that the award for
damages is not excessive under the attendant facts and circumstance of the
case."235 To stress, even if FILSCAP specifically asked
for actual damages, temperate damages should be awarded instead. This is because
due to lack of evidence, the amount of actual damages cannot be quantified with
reasonable certainty even if it is evident that FILSCAP indeed suffered losses.

To reiterate, FILSCAP, in its Complaint, did not include in its prayer the award
of actual damages. It asked for nominal damages236 and attorney's fees, on top of its
request to compel COSAC to secure a public performance license and then pay the
corresponding license fees for the performing rights of copyrighted musical works at
Off the Grill.237

It should be noted that nominal damages cannot be awarded in this case since it is
clear that FILSCAP suffered pecuniary loss, although the rates cannot adequately be
computed due to lack of proof. To expound, "[u]nder Article 2221 of the Civil Code,
nominal damages may be awarded in order that the plaintiff's right, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for
the purpose of indemnifying the plaintiff for any loss suffered."238 Otherwise stated,
"[n]ominal damages are 'recoverable where a legal right is technically violated and
must be vindicated against an invasion that has produced no actual present loss of
any kind or where there has been a breach of contract and no substantial injury or
actual damages whatsoever have been or can be shown.'"239 Nominal damages is not
proper in cases involving infringement of intellectual property rights because there is
a presumption that the copyright owner (or assignee) suffered a pecuniary
loss.240 Besides, by praying for nominal damages, FILSCAP may not have been certain
with the actual amount it lost. Regardless, it cannot be denied that FILSCAP suffered
pecuniary loss when COSAC did not pay for license fees before it allowed playing and
performance in public of copyrighted music at Off the Grill.

Even if its prayer for nominal damages cannot be granted for lack of basis, as
earlier discussed, FILSCAP is still entitled to temperate or just damages in accordance
with Section 216.1 (b) of the IPC, notwithstanding its failure to prove its entitlement
to actual damages.

Thence, the amount which should be awarded to FILSCAP should be based on the
following considerations:241 (1) the 500-seating capacity of Off the Grill;242 (2) based
on FILSCAP's matrix, the royalty fee of ₱170.00/day for lounges/bars/pubs which play
copyrighted songs live and mechanically;243 (3) FILSCAP's assertion that it demanded
from COSAC to pay license fees since October 2003, until the filing of the complaint
on February 13, 2006244 (although it is unclear when FILSCAP first discovered COSAC's
acts of infringement); (4) FILSCAP's monitoring agent identified only 25 copyrighted
songs which were played at Off the Grill without the requisite license and payment of
fees;245 (5) to acknowledge FILSCAP's members who are copyright owners, and
FILSCAP's authority to enforce their rights;246 and, (6) to balance the interests
between copyright owners and the society, in that the award of just damages is "[a]
not too excessive as to scare away other people from carrying out legitimate acts
involving copyrighted music, BUT [b] not too minimal as to give the wrong impression
that the State accords little value to copyrighted musical work and that creators do
not deserve to be compensated with reasonable economic rewards for sharing their
creations to the society."247

Considering the foregoing, the Court deems it proper to award FILSCAP the
amount of ₱300,000.00 as temperate (or just) damages, based on Section 216.1 (b) of
the IPC. Such is a fair and reasonable amount to show that the Court recognizes that,
apart from suffering pecuniary loss, FILSCAP has the right to require the procurement
of a license and the payment of license fees before COSAC can validly play
copyrighted musical works in its establishment.248 One should bear in mind that
FILSCAP, as assignee, is seeking to protect the intellectual property rights of the
owners of copyrighted musical works, and is not just safeguarding its own interest.

However, modifications regarding the applicable legal interest upon the said
monetary awards should be imposed in accordance with Nacar v. Gallery
Frames.249 Therefore, the monetary awards shall be subject to interest at the rate of
12% per annum from the date of the filing of the complaint or on February 13, 2006
until June 30, 2013, and thereafter, 6% per annum from July 1, 2013 until finality of
this judgment. Furthermore, once the judgment in this case becomes final and
executory, the said amounts shall be subject to legal interest at the rate of 6%
per annum from such finality until its satisfaction.

As a final note, the Court acknowledges that FILSCAP, by authority of the

deeds/agreements, represents the owners or holders of copyrighted musical works
under its catalogue. As the assignee, FILSCAP is tasked to monitor and issue licenses
to persons, businesses, establishments, and the like which are interested to play or
perform these musical compositions. Although it seems trivial or outrageous to collect
fees for this purpose especially when almost everything is readily accessible to the
listening public, the copyright owners are still entitled to be compensated for their
creative work. There is no question that they invested time, creativity, talent, and
effort in the creation and development of their compositions. Thus, assigning FILSCAP
to pursue their intellectual property rights on their behalf should not be taken against
FILSCAP, as it is acting not merely for its own benefit, but for the copyright owners' as
well. Still, FILSCAP's monitoring, licensing, and its other functions should all be
exercised within reasonable, proper, and just means.

WHEREFORE, the Petition for Review on Certiorari is hereby DENIED. The assailed
May 28, 2015 Decision and January 14, 2016 Resolution of the Court of Appeals in CA-
G.R. CV No. 101415 are AFFIRMED with MODIFICATIONS. The monetary award in the
amount of P317,050.00 as damages for unpaid license fees/royalties in favor of
the Filipino Society of Composers, Authors and Publishers, Inc. is DELETED. Instead,
petitioner COSAC, Inc., is ORDERED to indemnify the Filipino Society of Composers,
Authors and Publishers, Inc. temperate damages in the amount of P300,000.00. This
amount shall be subject to interest at the rate of 12% per annum, from February 13,
2006 until June 30, 2013, and at the rate of 6% per annum from July 1, 2013 until the
date of finality of this judgment. Thereafter, all the monetary amounts shall be
subject to interest at the rate of 6% per annum from the date of finality of this
judgment until full satisfaction of the same.

SO ORDERED.